PRC-1 · Chapter 10 · Question 31 of 100
In a partnership, where is the 'Interest on Partner's Capital' recorded before creating the final Statement of Financial Position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debited to the Profit and Loss Appropriation Account and Credited to the Partner's Current Account.
Explanation
Interest on capital is an appropriation (distribution) of profit. It reduces the residual profit available for sharing (Debit Appropriation) and increases the partner's equity (Credit Current Account).
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